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Japan Airlines Studies Setting Up Budget Carrier

Japan Airlines is examining establishment of a new low-fare carrier to increase capacity and take on rising competition from budget operators in Asia's second-largest economy.

Starting a discount airline is part of the carrier's need to widen its product line-up, Vice Chairman Junko Okawa said in an interview in Singapore on Monday.

Asia's budget airline revolution has been slow to sweep Japan, a market that JAL and its bigger rival ANA Holdings Inc. have dominated for decades. Aided by a tourism boom, low-fare carriers such as AirAsia Bhd., Jetstar Japan and Peach Aviation Ltd. have in recent years tried to wean passengers away from legacy operators.

"JAL has been focusing on premium full service so far, but as the popularity of LCCs spreads far and wide in the region, it is natural for companies like JAL to expand their line-up to low-price," said Kyouko Amemiya, a senior market adviser at SBI Securities Co. in Tokyo.

Foreign visitors to Japan rose 19% last year to a record 28.7 million, according to Japan National Tourism Organization. As part of its medium-term plan, Tokyo-based JAL is aiming to get 50% of its revenue from international passengers by 2020, up from 30% last year, Okawa said.

Shares of the airline fell as much as 1% on Tuesday in Tokyo, extending their losses this year to almost 7%, versus a 2% decline in the Tokyo Stock Price index.

After emerging from the shadows of bankruptcy earlier this decade, the government ended its oversight last year, freeing the carrier to set its own expansion plans, revive the business and regain some of the market share ceded to ANA.